Walsh v. Schlect, 429 U.S. 401 (1977)

Walsh v. Schlect

No. 75-906

Argued November 1, 1976
Decided January 18, 1977
429 U.S. 401

CERTIORARI TO THE SUPREME COURT OF OREGON

Syllabus

Section 302(a)(1) of the Labor Management Relations Act prohibits agreements of employers to pay money to any representative of their employees, but §§ 302(c)(5) and (6) exempt from this proscription agreements to pay money to trust funds jointly created and administered by trustees representing employer associations and a labor union for the purpose of providing medical or hospital care, pensions, or pooled vacations for employees of signatory employers, or to defray the costs of apprenticeship or other training programs. A collective bargaining agreement between petitioner general contractor and a carpenters’ union required signatory employers to pay contributions at an aggregate rate of 96 cents per hour worked by carpenter employees to certain trust funds (Health and Welfare, Pension, Vacation Savings, Apprenticeship and Training, and Construction Industry Advancement (CIAF)) administered by respondent trustees. With respect to nonsignatory subcontractors, a subcontractor’s clause of the agreement specified that petitioner should require the subcontractor to be bound by the agreement or that petitioner should maintain daily records of the subcontractor’s employees’ hours and to be liable for payment of the contributions to the trust funds with respect to these employees. Petitioner subcontracted certain carpentry work on a federally subsidized low income apartment project in Oregon to a nonsignatory employer (whose employees were not entitled to benefits in the trust funds), but did not exercise either of the above options. Instead, the subcontractor paid directly to his employees, as fringe benefits, 96 cents per hour in addition to their wages at union scale, thus paying out the same aggregate of wages and fringe benefits paid by signatory employers in the form of wages to their employees and contributions to the trust funds. Upon completion of the project, respondents sued petitioner in Oregon state court to enforce the subcontractor’s clause, and petitioner defended on the ground that the clause violated § 302(a)(1). The trial court sustained respondents’ demurrer, and, while holding that it would be "inequitable" to require contributions to the Health and Welfare, Pension, and Vacation Savings Funds because they would amount to a double payment with respect to the subcontractor’s employees, ordered an accounting limited to contributions to the Apprenticeship and CIAF trusts that did "not accrue benefits directly to the workmen." The Oregon Supreme Court affirmed sustainment of the demurrer, but, construing the subcontractor’s clause as giving all the funds equal standing, reversed the judgment insofar as it limited the accounting to the Apprenticeship and CIAF trusts.

Held:

1. Federal- rather than state law principles of contract construction apply in determining the meaning of the subcontractor’s clause, since it is a provision of a collective bargaining agreement and application of federal law is necessary to avoid the "possibility that individual contract terms might have different meanings under state and federal law," Teamsters Local v. Lucas Flour Co., 369 U.S. 95, 103. Pp. 407-408.

2. The subcontractor’s clause, as construed by the Oregon Supreme Court to require petitioner to make contributions to the trust funds measured by the hours worked by his subcontractor’s employees, the benefits being payable only to carpenters employed by petitioner or other signatory employers, does not violate § 302(a)(1), but is authorized by §§ 302(c)(5) and (6). Enforcement of the clause as so construed not only is consistent with the wording of §§ 302(c)(5) and (6), but also does no disservice to the congressional purpose in enacting § 302 to combat

corruption of collective bargaining through bribery of employee representatives by employers, . . . extortion by employee representatives, and . . . the possible abuse by union officers of the power which they might achieve if welfare funds were left to their sole control.

Arroyo v. United States, 359 U.S. 419, 425-426. Pp. 408-411.

3. The objective of the Davis-Bacon Act to protect contractors’ employees from substandard earnings by fixing a floor under wages on Government projects, is not "frustrated" by the subcontractor’s clause, since such objective is clearly not "frustrated" when contractual arrangements between employers and their employees result in higher compensation and benefits than the floor established by that Act. P. 411.

273 Ore. 221, 540 P.2d 1011, affirmed.

BRENNAN, J., delivered the opinion of the Court, in which BURGER C.J., and STEWART, MARSHALL, BLACKMUN, POWELL, REHNQUIST, and STEVENS, JJ., joined. WHITE, J., filed a dissenting opinion, post, p. 411.